7 thoughts on what's next and best in healthcare finance

Healthcare is moving outpatient due to technology development and a focus on value-based care. As a result, hospitals and health systems are looking at key strategies to transform their institutions in the future.

At the Becker's Hospital Review 8th Annual Meeting in Chicago, McGuireWoods Partner Geoff Cockrell, JD, moderated a panel titled "Lessons from the Experts: What's New, Next and Best in Healthcare Finance." The panelists included North Ottawa Community Health System CFO Donald Longpre; MemorialCare Health System CFO Karen Testman, RN; Chief Administrative Officer of Marshfield Clinic Health System Scott Polenz; and Director of Analytics and Cybersecurity at GE Healthcare Travis Frosch.

The key trends discussed during the panel include:

1. Balancing inpatient and outpatient investments. Traditionally hospitals invested in inpatient beds and departments for expansions and upgrades, but now more care is moving into the ambulatory setting. More patient interactions are done on the outpatient side and hospitals are building satellite ambulatory locations to extend their reach.

"We are looking for revenue growth opportunities," said Ms. Testman. "We did get into the business of freestanding ASCs and imaging centers. That's been a way for us to diversify our revenue and grow our revenue outside of the hospital environment. We are starting to look at opportunities in physical therapy and skilled nursing facilities."

Mr. Longpre discussed his hospital's efforts to keep patients out of the emergency room and urgent care facilities by attaching patients to a physician when they come in. Community agencies have space in the ER to help patients through the recovery process.

MemorialCare is also focused on outpatient strategy as part of larger population health and consumerism initiatives. The health system is investing in IT development tools to make healthcare access more user friendly, but at the same time continuing to invest on the inpatient side. "Most of our patients don't really appreciate what we are doing in terms of development on the inpatient record. It's not something that touches them," said Ms. Testman. "We are giving that some extra thought and trying to determine whether we can pull back on some of those resources and continue to invest on the ambulatory side and some of the things that our patients will actually touch and feel. For the most part, most of our patients don't end up in the hospital. Their interactions are with our physicians and surgery centers."

2. Updating the financial leadership model. The budget structure at many institutions is outdated in the era of value-based care. It may take a new budget and financial leadership structure to truly overhaul the system. "We are going from the typical budget process which is very painful and not value-added to a rolling forecast which is exciting for us in the aberrations area. I think for the first time in quite some time, our financial leadership wants to work with operations instead of just sitting in the room and sending the report," said Mr. Polenz. "They are sitting down and planning and giving us the tools we need to be able to do things proactively. Those are a couple things that are quite different for us as a system."

3. Value-based payments. The panelists feel value-based payments and risk-sharing payment models are here to stay. As a result, healthcare providers are spending significant resources to navigate patients through the healthcare system efficiently and ensure a pleasant experience. However, not all of providers' revenue is value-based and having one foot in and one foot out of the risk-sharing pool is challenging.

"What is interesting is the pace in which we are seeing it grow varies across the country," said Ms. Testman. "In California, we've had different forms of managed care and capitation for 20 years. We are seeing that continue to grow and a lot of creative partnerships and affiliations going on as part of that."

4. Creative partnerships and affiliations. MemorialCare signed an agreement with Anthem to create Vivity, which provides access to MemorialCare, Cedars Sinai and UCLA in addition to other well-respected systems in the area. "We are seeing more and more of the creative partnerships and affiliations involved, but in our market where 30 percent of our revenue is risk-based, the majority is still fee-for-service arrangements and it's hard to tell how quickly that will evolve in our markets," Ms. Testman said. "In other parts of the country it might still be relatively slow."

5. Cybersecurity investment. As hospitals and health systems move into the digital age, they risk hackers stealing their data and compromising medical records without the appropriate cybersecurity. Around 81 percent of hospitals increased their budget for cybersecurity in the past year, said Mr. Frosch, with some hiring big data analysts and other spending for managed services with more predictable costs.

6. Data analytics. Investment in technology and data analytics can help hospitals create value in small and large ways. In many hospitals, it's a big step forward to gather the cost per case data for a certain procedure and then identifying the surgeon costing the most — perhaps that surgeon is using a more expensive implant — and standardizing the procedure.

In other cases, large health systems are using data analytics to manage population health. "Organizations are taking on massive numbers of lives and they need more robust full sets," said Mr. Frosch. "The thing that we encourage is low hanging fruit, small bites and big return on investment."

Many hospitals don't have a comprehensive analytics strategy or understand where their budget will go in the future, said Mr. Frosch. "We have a framework for engaging with customers called FastWorks [which combines a set of tools and practices designed to build better products]. From anyone in software development, it's agile and in hyper drive," said Mr. Frosch. "I think really sitting down and understanding from the key stakeholders all the viewpoints and perspectives and iterating through that over a time horizon is the only way you can do that. And we've seen tremendous success with that."

7. Avoid overbuilding. Under-utilization is a problem for many healthcare providers, as several operating rooms, exam rooms and patient rooms go empty every day. The unused space still costs providers money and overall becomes a burden on the healthcare system. "We need to re-think what we do," said Mr. Longpre. "We can't say we are this big hospital that provides all this inpatient care. There is technology out there that is going to take orthopedics to outpatient surgery just like gynecology and urology moved from inpatient to outpatient. If you're a small community hospital, you're not going to have that much inpatient care."

Telehealth and virtual health are becoming more important as well. The technology can help people recover at home. Marshfield Clinic Health System is constructing a hospital and taking the trend toward outpatient care into consideration.

"In the market where we are building the hospital, we will try to take care of anywhere from 45 to 55 patients at any given time at the 44-bed hospital," said Mr. Polenz. "We aren't overbuilding because we know [outpatient is] the future. Even in our skilled nursing facility project, we anticipated certain numbers and when we got it up and running even a year later, some of the numbers we projected are being done in the outpatient basis."

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